Loan Approval Process in Banks
For some time, small banks and credit unions have had the competitive advantage over major banks when it came to loan turnaround time. Smaller institutions generally know the applicants better, which allows them to make a faster decision. They also don’t have to communicate with other offices, so they can cut back on time. But now, customers have an even faster option than community banks—online lending.
An article in American Banker this month explains that online lenders often have other advantages that can help them approve loans faster than any other lenders. Some of the benefits are exclusive to online lenders–such as that they only make loans, don’t take deposits and originate less risky loans—but others, like greater access to applicant data, can be adopted by small and large banks alike through credit software.
“[Online lender] CapTap, for example, uses data compiled from the $2.6 billion of loans made over a 10-year period by its parent company, Capital Access Network,” the article said. “Those data points include the average balance in a customer’s deposit accounts, and a historical look at debit and credit card sales through merchant-processing data.”
In contrast, major and community banks rely on documents given by the applicant, and usually have more of a hands-on approach to the process. While some customers likely enjoy the personal experience, this tends to take much longer for a loan to be approved and for the client to receive his or her funds.
However, with tools like credit bureau software and application processing software, any size bank can process loans efficiently, with the most information possible.